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South African rand pulls back on domestic growth worries

13 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand retreated from 10-week highs against the dollar on Wednesday, as nagging worries about domestic growth offset the boost from a generally risk-on global environment.

Stocks were set to open a touch firmer, with the Top-40 futures index of the JSE securities exchange edging up 0.3 percent.

The rand traded at 14.4225 to the greenback by 0859 GMT, down 0.57 percent from Tuesday’s close at 14.3410.

The currency had climbed to 14.2755 on Tuesday, its strongest since May 3, partly buoyed by a surprise jump in local manufacturing output.

The outlook for the economy, however, still remains downbeat, raising the risk of credit rating cuts before the end of the year. The IMF has cut its growth forecast for 2016 to 0.1 percent from the 0.6 percent predicted in May.

South African government bonds also dipped on Wednesday, and the yield for debt due in 2026 added 1.5 basis points to 8.675 percent.

 

(Reporting by Stella Mapenzauswa; Editing by Toby Chopra)

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Sudan inflation rate rises to 14.31 percent in June

12 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

(Reuters) – Sudan’s annual inflation rate rose to 14.31 percent in June from 13.98 percent in May, on the back of a sharp rise in the prices of consumer goods and services, Sudan’s Central Statistics Office said on Tuesday.

Prices soared in Sudan after South Sudan seceded in 2011, taking with it three quarters of the country’s oil output, the main source of foreign currency used to support the Sudanese pound and to pay for food and other imports.

In December, the Sudanese pound fell to 11.6 pounds to the dollar, its lowest rate on the parallel market since 2011, currency traders said, as the official banking system struggled to supply the dollars needed to buy imports.

 

 

(Reporting by Khalid Abdelaziz; Writing by Ola Noureldin)

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Angola halves growth forecast, cuts spending as oil price bites

11 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

LUANDA (Reuters) – Angola has halved its 2016 economic growth forecast and slashed government spending as lower oil prices hammer state revenues in Africa’s largest crude exporter, the finance ministry said on Monday.

Sub-Saharan Africa’s third-largest economy will grow 1.3 percent this year, compared with a previous forecast of 3.3 percent, the finance ministry said in a statement.

Government spending will be cut to $24 billion from $30 billion projected in the original 2016 budget as revenues were also slashed to $18 billion from $24.4 billion.

The statement, a rare disclosure by one of Africa’s most secretive states, said Luanda had borrowed $11.46 billion between November 2015 and June 2016, including $5 billion from the China Development Bank and $2 billion from other state-backed Chinese lenders.

Total government debt stood at $47.9 billion, including $25.5 billion in external loans, it added, although this figure does not include debt held by state-owned companies such as domestic oil firm Sonangol.

Cuts to public services have already had a major impact on the former Portuguese colony, with piles of uncollected rubbish lying rotting in the streets of the capital, in the shadow of half-finished concrete office blocks and shopping complexes.

Health experts say the spending reductions are partly to blame for a yellow fever outbreak that started in one of Luanda’s vast slums in December and which has spread throughout the country and as far afield as China.

The finance ministry confirmed it had ended emergency financing talks with the International Monetary Fund (IMF) because it had achieved “great fiscal equilibrium”.

However, it said it was still committed to a structural overhaul of an economy that remains perilously reliant on oil.

The finance ministry has cut its budgetary oil price assumption to $41 a barrel, from $45 previously. Crude oil output remains steady at 1.77 million barrels per day, it said.

 

(Writing by Joe Brock; Editing by Ed Cropley)

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South Africa’s Sibanye Gold to cut jobs at loss-making Cooke 4 mine

11 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s Sibanye Gold has began talks with unions for job cuts at its Cooke 4 mine after failing to stem heavy losses at the operation.

The company first broached the subject of job cuts at the mine with unions in November 2014. Since then Cooke 4 has continued to fall short of production targets and accumulate losses forcing the producer to re-open talks, the company said.

The chief executive of Sibanye’s Gold operations, Wayne Robinson, said in a statement the losses at the mine threatened the viability of the other three Cooke operations.

“It is unfortunate that despite the joint efforts of stakeholders, the Cooke 4 operations have been unable to meet required production and cost targets and has continued to operate at a loss,” said Robinson.

The Cooke operations, including four mines and three processing plants, had an operating loss of 4 million rand ($274,000) in 2015, the company said.

Job cuts are a thorny issue in Africa’s most industrialised country where the unemployment rate is near 27 percent, a big concern for companies faced with labour disputes. Unions were unavailable to comment but have opposed job cuts elsewhere.

Sibanye spokesman James Wellsted said the previous round of negotiations in November had led to some job cuts and a new plan to revamp the mine but the operation continued losing money.

He said the mine was unlikely to run with fewer people if it was unable to pay for itself.

“I don’t want to preempt the consultation process and obviously we are looking for solutions but we have not been able to improve the situation,” Wellsted said when asked whether the mine would be shut.

Sibanye employs 1,700 workers at Cooke 4 and about 7,000 workers at all its four Cooke operations, he said.

($1 = 14.6182 rand)

 

(By Zandi Shabalala. Editing by James Macharia)

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South Africa’s rand steady, stocks to open higher

11 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand held its ground early on Monday and was seen getting a boost from improved risk appetite as investors search for higher yields on expectations interest rates will stay low in leading economies.

At 0630 GMT, the rand traded at 14.5825 per dollar, not far off its New York close of 14.5750 on Friday.

“The much-stronger-than-expected (U.S.) payrolls figure has not hurt global risk appetite or the rand. The market has taken the figure as confirmation that the US economy is not slowing down but not so strong that the Fed will have to hike” Rand Merchant Bank analyst John Cairns said in a note.

“A rate cut from the Bank of England on Thursday would further encourage risk-taking.”

Several U.S. Federal Reserve officials are scheduled to speak this week, offering plenty of opportunities for the market to glean clues about policy.

Stocks were set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up more than 1 percent.

In fixed income, the yield for the benchmark instrument due in 2026 dipped 2 basis points to 8.685 percent.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Andrew Heavens)

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Angola’s Sonangol halts all asset sale talks

7 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – New Sonangol chief executive Isabel dos Santos has suspended all talks relating to the sale of assets belonging to the Angolan state oil firm and stripped its internal legal department of most of its powers, a statement said.

Dos Santos, the billionaire daughter of President Jose Eduardo dos Santos, was appointed to the Sonangol helm last month with orders to improve the efficiency of the sprawling 40-year-old firm, the central pillar of Angola’s economy.

The statement posted on Sonangol’s website after a board meeting at the end of last month said “all processes of evaluation, negotiation and sale of any assets” had been suspended with immediate effect.

It gave no further details.

Separately, it said the board had removed the legal department’s mandate to handle anything other than disciplinary matters. Again, the statement provided no more clarity.

Isabel dos Santos told Reuters last month she planned to hive off Sonangol’s non-core assets, such as its banking, real estate and airline interests, into separate holding companies to bring the company’s focus back exclusively to oil.

Boston Consulting Group and PriceWaterhouseCoopers have been hired as external advisers to the shake-up, which has won approval from the foreign oil firms operating in Africa’s top crude producer.

Isabel dos Santos also said she intended to improve transparency at Sonangol, long been regarded as one of the most opaque institutions in Africa.

In 2011, Sonangol was accused of misplacing $32 billion in oil revenues owed to the government.

The International Monetary Fund later said it had managed to track down the missing cash, attributing the accounting discrepancy to “quasi-fiscal operations” conducted on behalf of the government.

 

(Reporting by Ed Cropley and Herculano Coroado; Editing by James Macharia)

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South Africa’s AMCU union to start wage talks with platinum firms next week

7 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – The largest union in South Africa’s platinum industry said on Thursday it would be demanding higher wages for its members when it begins wage talks next week with Anglo American Platinum, Impala and Lonmin.

The union will seek a net salary of 12,500 rand ($853) as minimum wage for its lowest paid members who now take home around 8,000 rand or a 56 percent increase, and a 15 percent hike for higher paid employees when the talks start on July 12.

“At the rate that inflation is running I think surely we should push every worker in the mining sector to be (earning) 12,500 rand,” AMCU’s president Joseph Mathunjwa told reporters, adding that he would push for a one-year wage agreement.

The platinum firms did immediately respond to requests for comment.

While South Africa is by far the world’s largest platinum producer, the industry has been squeezed by rising costs, labour unrest and plunging global prices for the commodity.

Demand for the metal used to build emissions-cutting catalytic converters in automobiles has also been tepid.

The union made similar pay demands during the platinum wage talks in 2014 as well as in the gold sector in 2015, saying it was seeking “a living wage” for its members.

In both instances the hardline union was unsuccessful, which triggered a record five-month work stoppage in the platinum sector in 2014. The union did not hold a pay strike in 2015.

The companies are still recovering from the 2014 strike with Lonmin and Implats forced to raise cash from investors and Amplats hastening its mechanisation drive through sales.

“We will be approaching these wage negotiations with both parties respecting each other because they know what we are capable of,” Mathunjwa told Reuters.

This year’s wage-bargaining season has kicked off in the power, automotive and mining sectors, with some demands ranging from 13 to 20 percent, far above the current inflation rate of 6.1 percent.

($1 = 14.6545 rand)

 

(By Zandi Shabalala. Editing by James Macharia)

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South Africa’s net reserves rise to $40.826 billion in June

7 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s net gold and foreign exchange reserves rose to $40.826 billion in June from $40.48 billion in May, Reserve Bank data showed on Thursday.

Gross reserves rose to $46.366 billion from $46.081 billion previously, the central bank said.

The forward position, which represents the central bank’s unsettled or swap transactions, edged down to $1.616 billion in June from $1.64 billion in May.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Kevin Liffey)

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South Africa should not underestimate ratings downgrades risk

6 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa should not underestimate the risk of credit rating downgrades this year if the ailing economy does not improve, Central Bank Deputy Governor Daniel Mminele said on Wednesday.

Pretoria dodged ratings downgrades from Moody’s, S&P Global Ratings and Fitch earlier this year, giving policymakers time to act to strengthen the economy of Africa’s most industrialised country before the next round of reviews due by December.

Analysts have said South Africa’s economy faces hurdles and that the threat of “junk” status is looming.

“During May and June, South Africa received confirmations of unchanged credit ratings from all three major credit rating agencies,” Mminele said in a speech posted on the bank’s website.

“These confirmations, however, came with a very clear message: further improvements in the macroeconomic fundamentals are required.”

He said this suggested that “in the absence of demonstrable progress being made as part of a concerted effort involving all social partners, the risk of downgrades during the next reviews towards the end of this year should not be underestimated.”

The bank expects South Africa’s economy to grow by 0.6 percent this year and a modest recovery is seen over the next two years, but Mminele said the assumptions underlying the estimate had not factored in any possible spillover effects from Britain’s vote to leave the European Union.

“The UK’s present and future are now riddled with uncertainty, naturally accompanied by a flight to safety,” Mminele said.

“For South Africa, the implications through direct trade links are expected to be relatively minimal. In 2015, the UK accounted for only 4 percent of our total merchandise exports.”

Mminele, however, said financial linkages were far larger relative to the size of the South African economy.

For example, the value of South African assets owned by UK corporates and investment funds amounted to 46.5 percent of South Africa’s gross domestic product (GDP) at the end of 2014.

In turn, South African investors owned UK assets amounting to 33.2 percent of the African country’s GDP.

“In addition, both foreign direct investment and portfolio flows are also significant. This means that South Africa could very well be affected by the realization of tail risks emanating from asset liquidation by UK corporates and investment funds,” Mminele said.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia)

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Tinkering with South African fiscal policy won’t boost growth

5 July 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s economy is not growing fast enough to create jobs, but tax cuts or increases in public spending are unlikely to stimulate growth, a senior Treasury official said on Tuesday.

South Africa’s unemployment currently hovers close to 27 percent of the labour force, while data on Monday showed employment in the formal sector fell by 0.2 percent to 9.273 million people in the first quarter of the year.

The Treasury estimates that Africa’s most industrialised country could grow by 0.9 percent this year compared with 1.3 percent in 2015, while the central bank and the International Monetary Fund have forecast 2016 growth at 0.6 percent.

“It is unlikely that growth … will come from tinkering or manipulation of macroeconomic policy variables …, in other words reducing taxes or increasing expenditure,” Director General Lungisa Fuzile told a business conference organised by the Gordon Institute of Business Science.

Finance Minister Pravin Gordhan in February unveiled a package of spending cuts, civil service job freezes and moderate tax hikes, partly to avoid credit rating downgrades.

Fuzile said reforms were underway at more than 300 publicly-owned companies which the Treasury has pledged to wean off state bailouts, though he did not elaborate.

Many of these firms are a drain on the state budget and have been flagged by all three major ratings agencies as a risk to South Africa’s investment grade status.

 

ELECTIONS LOOM

Fuzile said he was concerned about the quality of governance among those firms, adding that the Treasury was close to finalising proposals for merging two state-owned airlines, South African Airways (SAA) and SA Express.

However, political analysts say the reform of state firms could suffer amid preparations for local government polls in August and factional contests in the ruling African National Congress which have led to violence and deaths across the country.

“Under such circumstances, you are not going to have a sober debate in cabinet about what to do to fix (the state firms). The calculus is not sound governance,” analyst Prince Mashele told Reuters on the sidelines of the business conference.

South Africa’s private sector contracted in June after expanding for the first time in a year in May as output fell and companies cut jobs, a survey showed on Tuesday, while another report pointed to waning consumer confidence.

 

(By Mfuneko Toyana. Editing by James Macharia and Gareth Jones)

 

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